Tower Resources LON:TRP, the AIM-listed oil and gas company with operations in Cameroon, Namibia, South Africa and Western Sahara recently published an update on the farm-out process in respect of its Thali production-sharing contract in Cameroon.
The Westminster-based O&G explorer’s main project is Thali, a shallow-water operation in Cameroon’s Rio del Rey basin. It covers an area of 119.2 square kilometres, with water depths ranging from eight to 48 metres. The Rio del Rey basin has to date produced over one billion barrels of oil. It has estimated remaining reserves of 1.2 billion barrel of oil equivalent (boe), primarily within depths of less than 2,000m.
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The company also has a four-year petroleum exploration licence covering an 80% operated interest in offshore blocks 1910A, 1911 and 1912B in Namibia. Tower Resources entered Namibia in 2018. The exploration agreement runs until the end of the month, but Tower Resources has been asked to enter a first renewal period for a further two-to-three years by the Namibian government.
Rift in South African Rift
In South Africa, through its wholly-owned subsidiary, Rift Petroleum Limited, Tower Resources holds a 50% interest in the Algoa-Gamtoos offshore licence. The company entered South Africa through the acquisition of Rift Petroleum in 2014. The Algoa-Gamtoos licence covers 9,369 square km. The company was operating in the Saharawi Arab Democratic Republic [West Sahara], but as part of a portfolio review sold its interests in the Guelta, Imlili and Bojador blocks in January 2017 in exchange for an over-riding royalty interest ranging from 5% to 10%, depending on the licence.
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With regards to Thali in Cameroon, Tower Resources is continuing its work on the evolution of large stratigraphic and structural leads and prospects. It plans to repossess the previously-acquired 2D seismic data over large areas of the licence. The explorer is also canvassing proposals with a number of parties and has an updated proposal from one suitor that would provide in excess of USD15m of funding for the Thali PSC work programme.
Tower Resources financial proposal to complete drilling
The financed proposal would help fund drilling the already-part-financed NJOM-3 well, in return for a minority stake in the project, retaining Tower Resources as operator. The agreement also provides for future production-based payments to Tower. A portion of these production-based payments is due to Pegasus Petroleum, Tower’s chairman and CEO trust with regards to a working capital facility that Pegasus provided to Tower in 2021.
The government of Cameroon has to approve the farm-out agreement and drilling schedule. The proposal will need to amend the existing production payment agreements, something that Tower believes will proceed without problems. The proposal also does not contain any financing contingency, as the counterparty has funds ready to deploy, and a portion of the funding will be secured by a bank guarantee. Tower’s management is assessing the proposal, and hopes to firm up a farm-in agreement with the proposal’s funder, or another suitor in the next few weeks.
Bank guarantee under discussion
Tower is also in ongoing discussions with a number of African banks to potentially agree a short-term facility to expedite production from the NJOM-3 well, but also longer-term debt to further its drilling programmes on the underlying Njonji structure. The company has already signed a mandate with the Development Bank of Central African States (BDEAC), a development finance bank in Yaoundé, to provide a guarantee for any facility, and the funding proposal is being assessed by BDEAC’s senior management.
Tower also announced a proposed placement of around GBP1.2m to cover working capital commitments whilst the Cameroon farm-out negotiations are underway. This will also fund Tower’s ongoing commitments to its operations in Namibia and South Africa.
The company’s shares closed trading at 0.0313p on 22nd October, down 6.5% over one-year, but up 45% year-to-date. The company has a market capitalisation of GBP5.5m.
